Abstract
Like so much else during Donald Trump’s historically unproductive first months in office, the massive infrastructure spending plan that had been trumpeted so emphatically during last year’s campaign remains mired in executive incompetence and legislative dysfunction. By early summer, Trump had filled only one-tenth of the positions requiring Senate confirmation in the critical Department of Transportation, and hundreds of other Cabinet- and lower-level government jobs presumably necessary to the design and implementation of such a gigantic public initiative remained vacant as well. Meanwhile, many of the long-awaited details of the spending plan had still failed to emerge, despite repeated promises from key players like White House Budget Director Mick Mulvaney, Pennsylvania Republican and House Transportation Committee Chairman Bill Shuster, and Transportation Secretary Elaine Chao—not to mention, of course, from the President himself.
Yet even before the nuts-and-bolts of the legislation had been revealed, one thing has long been clear about the President’s plan for increasing investment in the country’s flagging infrastructure: It will rely heavily on collaboration with the private sector. In this, Trump actually has something in common with his most recent predecessors in the White House. An emphasis on private financing, construction, and maintenance has become an increasingly important feature of American infrastructure policy over the course of each of the past two administrations. Both George W. Bush and Barack Obama revised federal legislation and procurement practices to encourage the use of innovative funding models like public-private partnerships (or “P3s” as they are often called). And both did so despite the significant popular opposition that has accompanied proposals to privatize public roads and other facilities, and the comparatively strong position of the municipal bond market as a source of funding for public building projects in the United States.
P3s generally take the form of long-term contracts between governments and private companies or consortiums of firms, to build and maintain (or simply maintain, in the case of already-existing projects) various kinds of facilities, from toll roads and bridges, to sewage systems, air traffic control systems, and housing developments. The liberal Economic Policy Institute has described P3s as “sitting somewhere between standard public provision and full privatization of infrastructure.” States like P3s because they allow them both to forego the challenges associated with raising funds for construction, as well as to offset the risk associated with making infrastructure projects profitable, while private entities like them because the contracts they sign to operate these facilities usually provide relatively reliable long-term revenue streams, which can even be bundled and resold on secondary markets. And since P3s are concessions rather than outright sales, the terms the contracting parties agree upon can, in theory at least, include operating standards, which give states recourse in the event of the worst public outcomes, like rising costs and declining service. After the domestic market for these kinds of arrangements got off to a slow start, “an accelerated number of P3s have entered the pipeline since January 2014,” according to a recent analysis by PricewaterhouseCoopers.
So it should come as no surprise that Trump—the lifelong real estate mogul, who was heard gloating, “Now you have a builder as your president!” during a speech before the construction industry—has given every indication that he wants to double-down on this trend in his approach to rebuilding the nation’s roads and bridges. Just ask the man who often stands directly to Trump’s right during speeches like that one, brandishing a giant flow chart with all the highway-construction regulations the current administration hopes to do away with: David James “DJ” Gribbin.
Gribbin is a member of Trump’s National Economic Council, and as Special Assistant to the President on Infrastructure Policy is second only to Council Director (and former Goldman Sachs President) Gary Cohn in having a hand in developing the executive branch’s infrastructure program. Like Cohn and so many other appointees of the Trump White House, Gribbin is also a prime example of how Candidate Trump’s promise to “drain the swamp” of Beltway insiders and influence peddlers was nothing more than the most venal and disingenuous of campaign rhetoric. Gribbin has spent much of the last three decades moving between industry jobs at some of the more powerful forces pushing for the expanded use of P3s, most notably with the Republican Party heavyweight Koch Industries, where he served as Director of Public Sector Business Development, and Macquarie Capital, an Australian bank which is currently the largest infrastructure asset manager in the world.
In both cases, Gribbin’s portfolio of responsibilities included, in his own words, “encouraging the increased use of the private sector in the provision of transportation infrastructure”—an objective he likewise pursued during two revolving-door stints in the Bush administration’s Federal Highway Administration and Department of Transportation. Indeed, at one point during Gribbin’s confirmation hearings in 2007, before he was appointed General Counsel for the Department of Transportation, Senator Mark Pryor of Arkansas pointedly asked, “How will your role at USDOT differ from your previous role at Macquarie Holdings since one of the agency’s new initiatives is to promote the same thing,” namely, the creation of a legislative environment that encouraged the privatization of state toll roads. To which Gribbin replied it would be “fundamentally different”—although aside from the fact that he would now be doing so on the taxpayer’s dime, he did not specify how. As if that alone did not scream conflict of interest, Gribbin is also the only person ever to win the American Road and Transportation Builders’ Association “Entrepreneur of the Year” award in both the private and public sectors.
With Gribbin back in the driver’s seat, it was no surprise to hear that public-private partnerships would be a “critical tool” in the Trump administration’s infrastructure playbook, as Glenn Youngkin of the Carlyle Group—another private equity firm that is one of the largest investors in infrastructure projects—reported after recent discussions with White House officials. And although the jury will have to remain out on how the Trump infrastructure plan will implement the P3 framework until a final version of the legislation exists, the track record of Gribbin’s previous employers is hardly encouraging. The “Macquarie model” of infrastructure asset management has been known to purchase public facilities and pay dividends to investors by borrowing heavily against expected future revenues, which has led one financial analyst to say of the investment fund that it “bears the hallmarks of a Ponzi scheme,” and another to compare trying to make sense of its debt-to-capital ratio to “wrestling with a ghost in the dark.” Macquarie-financed highway projects in Indiana and California have ended in bankruptcy, sunk by ballooning debt-loads. In 2013, a creditor for a Macquarie-owned tunnel connecting Detroit, Michigan and Windsor, Ontario, sued the firm for “fraud and misrepresentation,” claiming it had provided “unrealistically high traffic and revenue forecasts” so as to “justify the overpriced bids it had placed in acquiring infrastructure assets.”
Financial opacity and leverage shenanigans reminiscent of the subprime mortgage boondoggle are not the only questionable practices Macquarie engages in. In the first ten months after entering into a concession to manage the Chicago Skyway—a 7.8-mile stretch of road that runs from the Indiana state line to Chicago’s South Side—toll prices went up 25 percent, while toll-takers saw their pay cut in an effort to reduce labor costs on the road. Keeping costs down in this fashion is another major selling point for public-private partnerships—especially for advocates of deregulation like DJ Gribbin’s other former employers, the Kochs, who see the nontraditional financing structure of P3s as a way to navigate around wage and other kinds of regulations that normally apply to infrastructure projects that receive federal funding. In March, Freedom Partners, a conservative group funded by the Koch family, issued a four-point memo for “smarter infrastructure spending,” which put the elimination of one such piece of regulation, the Davis-Bacon Act—a New Deal-era law which guarantees the payment of local prevailing wages on government-funded construction projects—as the first order of business for a Trump administration infrastructure plan, claiming it would cut $11.7 billion in labor costs.
As he has with the rest of his infrastructure plan, President Trump has played it coy about his own intentions when it comes to Davis-Bacon. Trump has reveled in the support he received last November from members of the building trades unions, which have long fought to preserve Davis-Bacon from contractors’ efforts to skirt its protections. But when asked about Davis-Bacon by the New York Times back in early April—a day after trotting out Gribbin’s chart of regulations in front of an audience he referred to as “some of my friends who are builders”—Trump would say only, rather menacingly, that he would “have an announcement in two weeks” (so much for that), and that “it’s going to be good.” With Gribbin by his side, one can only suspect that the news will be “good” for half of that particular partnership.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.